Purchasing's Role In Delighting The Customer
Mark S. Miller C.P.M., C.I.R.M.
Mark S. Miller C.P.M., C.I.R.M., Purchasing Manager, Case Corporation, Racine, Wi. 53404, (414)- 636-6565, MMiller@Casecorp.com.
Steven R. Fogle, C.P.M.
Steven R. Fogle, C.P.M. - Purchasing Team Leader, Case Corporation, Racine, Wi. 53404, (414)- 636-7696, SFogle@Casecorp.com.
83rd Annual International Conference Proceedings - 1998
Abstract. Extra ordinary customer service can be used to differentiate one company from competition and to build customer loyalty. Purchasing can play a key role in improving customer service. We will review the relationship between customer service and purchasing and offer four tactics we have used to "delight the customer".
Talking the talk. Many companies are listing customer focus as a key objective. In our companies strategic framework we state: "We will have a thorough knowledge of our customers and are committed to delighting them." And our company is not unique. The following are statements from other major companies annual reports that also points to customer focus:
- Johnson Controls - "Most of our growth comes from the fact that we do more for our customers". James Kelly CEO.
- Harley- Davidson - "We're in a relationship business... Our strategies call for us to continuously improve our working relationships with our dealers so they, in turn, can do the same with our customers." 1996 annual report.
- Mark IV Industries - "Our primary focus is to exceed the expectations of our customers." 1996 annual report.
- Goodyear - "Strategic business units are organized to meet customer requirements." 1994 annual report.
- Motorola - " Does business grounded in unchanging key beliefs coupled with a dynamic balance of customer focused initiatives." 1995 annual report.
Our company is focusing on the customer. So what is purchasing doing to support the focus on the customer? Purchasing is traditionally associated with managing supplier relationships. We are being measured on traditional objectives such as: cost reduction, price variance, supplier delivery performance and supplier quality. The following is a review of the relationship between purchasing and customer service. We will examine who are purchasings' customers and offer four tactics we have used to improve the customer focus of our purchasing department.
Purchasing's customer. Before we can improve customer focus, we must first have a clear understanding of who our customer is. A customer is usually thought of as someone who comes to our company for goods or services. Purchasings' customers, however, is anyone who depends on us . We can have external customers( outside the company) or internal customers (inside the company). Each company and department will be different, but the following is our list of purchasings' external and internal customers that you can use as a reference.
External customers. The first external customer that comes to mind is the end user who uses the companies products or services. In our company the customer is the farmer who needs good equipment to produce more crops or the contractor who uses backhoes to build houses more effectively. Purchasing plays a key role in obtaining raw materials or finished goods that conform to customer requirements. Customers expect products to be top quality, competitively priced and available when they want them. The buyer must purchase parts and materials that meet these customer requirements of price, quality and availability.
Another external customer of purchasing is the supplier . The supplier depends on purchasing for information so it can supply products to our expectations. Among the pieces of information the supplier may require from purchasing includes: forecasts, schedules, specifications, blueprints, contracts, purchase orders and routing information.
Internal customers . The list of internal customers we have identified is much longer than the external customers. They include:
- Accounts payable - Needs purchasing to resolve price discrepancies.
- Inventory control - Depend on purchasing to find sources and place orders to fill requisitions.
- Engineering - Requires purchasing direction on selecting new suppliers for new product development.
- Receiving - Purchasing assists receiving in resolving receiving discrepancies ( purchase order miss-matches, wrong part numbers, wrong quantities, early shipments).
- Quality - Purchasing addresses quality and warranty issues with suppliers.
- Manufacturing - Purchasing expedites supplier shipments so the product is available to support the production schedule.
- Customer service - Reliable information from suppliers to respond to customer inquires.
- Information systems - Purchasing advises systems of the suppliers prepared to be electronic commerce partners.
- Management - Purchasing provides forecasts of material prices for planning and budgeting.
Four tactics to improve Purchasings' customer focus. After you have identified who your customers are, the next step is to improve the service you give your customers. We have used four techniques that have greatly improved the customer focus of our purchasing department: establish common customer service goals, establish a process organization structure, interface with your customers, and get suppliers to help.
1) Establish common customer service goals. Most functions in the organization have their own private set of goals: Purchasing is usually judged by cost reduction and supplier performance, inventory control goals are tied to managing the investment in inventory, production measures units shipped, and sales is trying to increase sales volumes. To truly become a customer focused organization we need to switch our goals towards servicing the customer. We have established common customer service goals for everyone in the company based on a customer service index. The customer service index is based on customer surveys that are done continuously to measure how we're doing in our customers eye.
Top management can play a significant role in supporting these common customer service goals. Management can lend there support by making these common goals key to determining bonuses and salary increases . Common customer goals also help remove functional conflicts as well as focusing the company towards the customer. Functional goals are still important, but unless the company customer service goal is met, no function within the organization should be considered successful.
2) Establish a process organization structure. Another tactic we have used to improve our customer focus is to establish a process versus a functional organization. The traditional functional organization doesn't control the processes that cross over many functional areas. Experts tell us that most of the processes that affect customer service cross over most functional lines( see Improving Performance- How To Manage The White Space On the Organization Chart - by Rummler and Brache). A method to solve this organizational dilemma is to form cross functional teams with the charter to improve processes. The following are two examples of cross functional teams that purchasing has worked on recently.
- We revised our customer service process a few years ago and purchasing was a key member of the team. The goal of the team was to more quickly and accurately respond to customers questions. Purchasing worked with suppliers to provide accurate shipment promises: using advanced shipping notices or in-house supplier personnel. Now the customer service agents have accurate shipping promises on the system when they answer a customer call.
- To improve customer support for new products purchasing was part of a cross functional team that established an integrated product development the process. It was the teams recommendation that purchasing work more closely with engineering and suppliers on product development . Buyers were stationed with the engineers and required supplier additional involvement in the product development process.
- In the past few years we have formed many review teams to determine if the products or services should be performed inside the company or by a third party. Purchasing should play a lead role in these make or buy teams.
We also consolidated some functional areas to form work teams using a matrix approach. We combined purchasing, inventory control and expediting into material control teams. We also combined customer service, order entry and telemarketing into one Customer Account Management team. Forming teams to improve processes and combining functional groups into teams are good ways to improve customer focus.
3) Get out and talk with customers. To better serve the customers you first must meet and understand your customer needs. Hold meetings with your internal customers and identify areas that can be improved. Then form cross functional teams to improve the processes you have identified. We hold monthly meetings with our internal customers to review results of the process teams and to identify new areas of opportunity.
We have also made efforts to get to know our external customers.
- We have had buyers sit with customer service and help take customer calls.
- When visiting suppliers we try to arrange visits with dealers in the same area.
- We work with marketing in booths at the annual product support meeting and interface with our dealers there.
Purchasing is often far removed from the customer. By meeting with customers you can gain an appreciation for how competitive the marketplace is and the sense of urgency that exists in supplying the product to the end-user. Taking steps to allow more interface with customers will lead to improvements in purchasings' customer focus.
4) Getting the suppliers to help. The fourth tactic we have used to improve customer focus is to involve suppliers in customer service. Each time we meet with suppliers we explain how we measure customer service and show how they can contribute to our customer satisfaction. We stress that by satisfying our customers that we will grow our business, which in turn will grow the supplier's business also. There are many processes that impact customer service which we need supplier support to improve. These include: just in time delivery, quick response, lead time reductions, more flexible schedules, electronic commerce and bar coding.
Suppliers are a critical part of the supply chain to the customer. It is purchasings' responsibility to solicit supplier help to re-engineer processes that will improve customer service.
Purchasing has an important role to play in improving your firm's customer service. Spend the time to identify your internal and external customers. Try the four tactics we have discussed to improve your purchasing departments' customer focus:
- Establish common customer service goals.
- Improve processes with cross functional teams and consolidate the organization where practical.
- Get to know your customer better.
- Get suppliers involved in improving customer service.